A sweeping relaxation in foreign direct investment limits could be round the corner.
According to sources, a government panel has also recommended allowing FDI in most sectors under the ‘automatic route’, thereby doing away with the need for government approval.
The exceptions are sectors where the cap is statutorily fixed and can be increased only with a Parliamentary nod.
According to the sources, the FDI limit may be raised for joint ventures in defence, broadcasting, telecom and private banks, if the recommendations of the Arvind Mayaram Committee, which was given the task of examining the issue, are anything to go by. Mayaram is the Union Economic Affairs Secretary.
The committee has submitted its report to the Finance Minister. Mayaram said that the report can only give recommendations, it will be up to the Department of Industrial Policy and Promotion (DIPP) to take action.
However, the Government is not willing to make the report public at this time. The committee was constituted after Finance Minister P. Chidambaram announced in his Budget speech that steps will be taken to remove ambiguity in the definition of foreign investment. Last week, Chidambaram had said that after the submission of the report, he will meet the Commerce and Industries Minister (under whom the DIPP falls), followed by a final meeting with the Prime Minister.
According to the sources, the FDI limit in the defence sector is likely to be raised to 49 per cent from 26 per cent now.
Similarly, telecom and private banking could see FDI up to 100 per cent against the current 74 per cent. Print and broadcasting media might have FDI limit up to 49 per cent from 26 per cent now.
There is also a move to axe the requirement for approval from the Foreign Investment Promotion Board (FIPB) for FDI of up to 49 per cent in various sectors.
However, FIPB approval could be retained for sensitive sectors so that strategic interests are not compromised.
Merging FDI, FII cap
One key proposal is also setting a single cap of 49 per cent merging Foreign Direct Investment and Foreign Institutional Investment. Currently, the FII, or portfolio investment, limit in various sectors (excluding public sector banks) is 24 per cent.